Rear, and thats the way its been. Josh, you have some technical difficulties, as we would say, dow, s p, nasdaq below their 50 day moving averages yesterday, momentum has dried up, the third negative week in a row. The russell is not doing well. You can sort of pick the area of the market you want to pick on, because there are a lot of places to look at. Ive been in the camp this is seasonal and what you should expect in the month of august, and i have a million charts that back that up and im not ready to move away from that argument if things get materially worse, i may be forced to rethink that. I do not think this is about, all of a sudden, theres going to be this renewed push for a ton of new rate hikes. And, in fact, most people you ask them whats going on in the market this month, why did august suck so much . The rate increase, the odds are higher. Its a 90 chance of no hike and a 10 chance of a 25point basis hike and that would be okay. I dont think that is a huge difference. A lot of the macro people will tell you look at yields all over the world. Theyre higher. Okay. Its a steepening. Its what you should have. If gdp forecasts are to be believed, were going to have another quarter of strong growth, why wouldnt we have more steepening . For me thats enough. One area of concern, and id love to get belskis take, maybe 7. 25 is too high for a 30year mortgage. Maybe thats where things get real and the selloff in Home Builders yesterday was probably that mortgage number, where i have the most concern. How much higher can that go. Im not seeing what other people are seeing and i think this is a textbook kind of pullback. Brian, the correction thus far, i thought gold man said, quote, liquidity is ebbing. Price action skittish and tactical nefbs are suddenly a bit frayed. That pretty much sums it up. Josh and i were talking before hand, and you go back and look at my career and in august theres always something going on. Last year was very volatile heading into september. Were not surprised to see this weekend. Weve been talking or this weakness weve been talking about. The Home Builders, josh, people forget Home Builders were one of the best after tech so this could be some profit taking. Thats a 7 number that does freak some people out. A lot of supply, thats an area you want to start with these types of reactions on stocks to make a list to bottom fish. You bumped your target on june 5th from 4,300 to 4,550. At what point do you get nervous from 4,550 given the unsettled nature of where were at and seasonally as you said, september october could be tough. Im actually more worried that 4,550 might be too low. The way earnings are coming in, scott. I think theres a very good shot we make it to our bull case of 230 and could buoy stocks higher. Remember september were more back to normal than we have been. Were going out and visiting companies, talking to companies, the bottoms up market this year and this is all about fundamental stock picking. I do think well see some sort of a rebound and really strong Fourth Quarter which would get us closer to the 50 50 level. Whats back to abnormal is china, thats this overhang were trying to assess. The recovery was sluggish and now looks like a deceleration in growth there. It seems its having a harder time doing that now. Thats why i think josh is spot on with respect to the potential for further rate increases. If china is actually going to be really slowing like everybody thinks it is, then the fed may have to think the opposite direction, number one. Number two, emerging markets in china did very well last year. Theres no doubt theres massive fundamental issues weve been avoiding. Michael heartnet sort of sees this swoon, if you will, through the summer and maybe to 4,200. Brian is channel willing this point of view. You get through the fall and it could be a little ugly like it typically is. And then you have a ramp into the end of the year that can still get you to some nice targets. That would be quite a swoon and were not thinking thats going to happen. People will start to take the opportunity with the tech names. Its a friday in midaugust. The market opens down. That continues and it accelerates intothe day. Whats happened so far today were seeing a settling down and people are coming in and buying. People are watching with these names that have led the market. They are better than feared and if gdp is in the 4 or 5 range or higher well start to see that in earnings. Were a consumer economy. Then youre going to have numbers that will give people encouragement to buy those names into 2024. The market is not that expensive. Theyre 14 times earnings and the multiple of the Largest Companies are coming down even if google, for example, and meta are not very high multiple stocks. I think settling down right now is a good idea, it is healthy. It was what we needed to see with the mega cap names and that is what were experiencing. And everybody always says that its healthy. Its what we needed to see. Weve been talking about the inability of the market to find its footing as long as Interest Rates continue to go up. Rates have been backing up today, at least theyre backing off. Apple going down consistently. It was red and now its green. No surprise as the phenomenon happened, its enabled the market to turn a corner at least as we come on the air and get back into positive territory. What do you think about that . I think today is tied to yields. While i agree the base case remains the same, the inflation is under control and the economy is strong, no landing, soft landing, thats the base case. There have been nicks in the story. Will there be china contagion into the u. S. . Are rates too high and will they stay higher for longer, and then is there going to be some softening . Is what the feds done over the last year and change finally trickling into the economy as well as you see Student Loans and savings. Savings have been depleted. Its exing a baited by low volume in this seasonal period. I think the market is okay. I think its a great opportunity to trade the market. Today being a perfect example. Meta was down 9 or so. In addition to the position that i had, as you may recall i shaved it about a month ago. If trading is part of your expertise, if not, youre best off to buy and holding. The other thing thats really hit home and you take a look at apple, the move in the market was multiple expansion. Apple, in my view, being one of those. More than just a pure momentum market. This will take some work to figure out. Mega cap p es have come in. Alphabet 4. 5. Nvidia, 9. 5. Josh, you had to believe theres so much optimism around the names, it wasnt going to take much more. Theres so much hype and the positioning these select companies have within that universe and where we think thats going. Are you going to get enough to come in and reverse some of that steeper selling in names like apple which some have suggested could trade back down. Stocks off their lows from less than a year ago, last october. If you froze the market right now and told everyone, sorry, were closed until december 31st, nobody in those stocks would be unhappy with their year end 2023 performance. If were going to get the rotation, and i was all onboard with, okay, lets look at small and mid now. We had a big run in the first half. Now lets pivot. I want that had to work for a lot of reasons. You had this furious 15 rally which had done nothing up until may. Had a lot of participation. We were talking about etf flows, all of the money was going into midcaps. Or equal weight etfs. Look at august. The small names are doing worse. The russell 2000 is down 8 month to date. The s p is only down 5 . That narrative might might hold true for the rest of the year or it might already be over. I would love to hear your take on that. Can we look at other stocks . You see attractive valuation. That doesnt mean good buy now. Talk about rotation and the back to normal and owning all these other asset classes, we look at the four major pillars. Relative performance was the big caps. Relative Earnings Growth, relative valuation and relative operating performance. From all four of those, especially performance, obviously, they got killed in valuation, that tells us on the operating performance there are amazing names. We believe you want to have exposure there. August was all about Long Duration assets being penalized. We think this is an amazing opportunity to do your bottom fishing and work on a fundamental basis and really start to add to that allocation. Do you think were going to get to joshs questions about a rotation were going to get it and, if so, why would you . I think everything is going back to normal. Why wouldnt it . Shock in 2022, awe in 2023. Were going back to work. We see trends of normalized valuation, normalized Interest Rates. Still negative Earnings Growth. Lets not paint a rosy picture three to five years. Over the next three to five years. We need to shake things out and were positioning for that. Steve said were higher for longer. Thats great. Higher for longer is higher than zero. Anybody would come on and say, well, if your time horizon is three to five years, a good time to buy stocks because they traditionally go up. That doesnt help people that much i would argue it helps people more than what will happen the month of august. Who cares about the rest of the month of august . We can talk about the rest of the year. I think more relevant than just blanket advice, three to five years is great. Earnings will be better three to five years. Wait until you see ten years. Its a process. You cant have a period you have massive outperformance of growth for 10 to 12 years and no representation from small mid cap. The best thing about america in terms of the growth is about small mid companies, not just the consumer. We think its a burgeoning asset class that is massively underowned and from a contrarian basis now the fundamentals are telling you to buy this. Thats why were so excited. Less china exposure is the positive. Correct. Equal weight a portfolio to 16, 17 times earnings, much less than market cap weight, historically more Interest Rate sensitive, so is that going to be a risk to the rotation, to the value trade . He asked the question, kari, josh does, whats your answer to that . Will it make a difference because of Interest Rates . They can move a lot. Youre looking at apple and microsoft. Think about that. I hope they move. What the big guys, girls, are doing because 15 weight in two stocks is what you have in the s p. We all have to be concerned about how the market trades them. Weiss, small, mid or mega, whats the best way to go right now . If you look at whats happening in the lending market, credit is much better, and they need to keep borrowing. The economy is not evenly advancing. We see that through reports, earnings were down again this quarter. Lets be clear about that. At that impact Small Companies much more so than Larger Companies who dont need to finance particularly the ones that you highlight their cash cows. They can still borrow below market rates because who doesnt want them as a credit . In terms of any lending survey, any data coming out of the fed shows credit is getting very, very tight there. And even if credit werent tight, what does it do to your margins when you see money go from 3 to 7 and higher during the past year . The time to be negative earnings on earnings was six months ago not today because you have to make the argument that they troughed and that the negative Earnings Growth that weve seen is going to rebound, which is the projection for the earliest part. And once up get into more significantly into 2024. Earnings will rebound at some point. Im not that optimistic right now. And the reason being is that rates are going to stay higher. So whats going to be the catalyst for earnings to have a significant pickup, right . Particularly as youve depleted the Household Savings you have there, as you see credit card delinquencies slightly moving up, particularly as you see Household Debt increasing. What will be the catalyst . The other issue i dont know. I just feel like if the economy is going to be much stronger than people think, theres your catalyst for an improving earnings picture. I dont think you need much more debt. Inflation moderating that hurts margins a bit obviously. Inflation moderating is i say inflation has helped earnings. A contributor to troughing and turning higher. Inflation has helped earnings. Thats no, no, no. Lets all stop. Inflation has helped revenue. Earnings can improve if we get to a situation where were not just relying on passthroughs of costs but we have a situation where companies can breathe again, and if the labor mark gets less tight, i would argue thats a potential source of earnings improvement. I want to turn our attention hang on, weiss. I want to move on because i only have a few minutes left in the segment. I want to turn to nvidia. Because of whats been happening with mega cam and the meltdown weve seen, and i mentioned the stock down 9. 5 . Weve been talking about it a lot and for good reason. Josh, youre the expert on this one. The pressure has to be real high. It would be high enough anyway after the dramatic stock move that weve had. Now with the pullback, now with questions about mega cap tech, man, that bar is going to be real high next week for nvidia. I agree. You have street high targets now with four digits. Almost every day you get a new target. Listen, theres a lot of enthusiasm for the stock. Its wellfounded enthusiasm based on fundamentals. The debate is not is nvidia going to kick ass this decade, are you overpaying for that right now . And i can see where you could win that debate just very simply one of the most expensive stocks ever in the s p 500. This is the most expensive. Its 40 times trailing 12month sales. How many stocks have gotten to evaluation like that and have rewarded their shareholders three and five years out . Not a lot. The thing is historically it gives you nothing on a 12month look ahead and a lot of expensive stocks continue to get more expensive or to excel. Yes, the price is higher this year but the fundamentals have made a kquantum leap forward. I cant tell you this is a cheap, great opportunity, jump in it right now. I wish i could. Its not the reality. Maybe you feel better i will never feel better. Im asking you in terms of at least you havent gotten a continued rampup into the earnings. Youve gotten the pullback. The stock was 120 a share, like, 16 months ago. I mean, yeah, its great that it didnt go up another 30 this quarter, but the pressure is definitely i agree with your original premise, this is tough, this is tough. You want to be in it. Look, 250 billion, they had 6 of it. Theyre probably going to have 30 of it. Thats the opportunity here. Thats why everyone is so excited. Youre just not getting it all in one quarter. Thats the risk here. You own it, too . We own it in two or three portfolios. Are you as concerned as i am that its made the move . No. We should hang out more then. Two best in brand names, amd and nvidia. I think they will continue to run the ship. What you were talking about is maybe investors are going to buy the news instead of selling the news. Right . No, no, im not going on that. Im just saying the dynamic feels like its maybe a little better going into a print with a pullback rather than a further ramp. Correct. For a stock up 200 year to date. How much is the pullback even, though . Its not a substantial pullback. Its down 12 from its 52week high, not even 10 over the month, brian. A short list of names you want to start bottom fishing heading into september. Maybe its the most critical. We keep hyping apple up because of the size of the market cap makes sense, but maybe nvidia is the most important stock in this market right now. First of all, its a trillion dollars. Second of all, a large part of the nasdaq rally we had this spring into summer was predicated on the ai story. It came out of nowhere and it enabled usto all stop talking about the fed and cpi. So nvidia has to deliver because a lot of other large cap stocks that have had big runups this year are reliant on that ai story being intact, the build, the demand. That has to stay good for a lot of other stocks not just nvidia. Arguably its more systemic than apple. Were going to take a quick break. Were going to discuss a bullish call on one stock trading at sixyear lows today. Josh called it a value trap earlier this week. Oh, no. The debate is up next. rba iju t mutwee ckn stwoines. Let Innovation Refunds help with your erc tax refund so you can improve your business however you see fit. Rosie used part of her refund to build an outdoor patio. Clink dr. Marshall used part of his refund to give his practice a facelift. Emily used part of her refund to buy. I run a wax museum. Let Innovation Refunds help you get started on your erc tax refund. Stop waiting. Go to innovationrefunds. Com you really got the brows. Hows the chicken . The prawns are delicious. Oh, i have a shellfish allergy. One prawn. Very good. Did i say chicken wrong . Tired of people not listening to what you want . Its truffle season ah thats okay. Never enough truffles. How much are they . Its a lot. Oh okay im good, that its like a priceless piece of art. Enjoy. Or when they sell you what they want . Yeah. The more we understand you, the better we can help you. Thats what u. S. Bank is for. Huge relief. Yeah. Nice footwork. Yeah. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes thats what im talking about. [ cheers ] running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Were back on the half. To our call of the day. Its mizuho sticking with its buy rating on paypal. More than 50 50 upside. Earlier this week josh said he wouldnt touch it. I think paypal is a huge value trap. There are a lot of people that come on our show to talk about this as being cheap. I think apple and google pay options are just absolutely draining their moat. Its at a sixyear low today. I still wouldnt buy it. Kari, you own it. What do you think about the call . 50 upside and what josh had to say the other day. And for like the last year, in fairness. This is the opposite of meta, of course. Meta is a stock that was down a similar amount. I think paypal is down 80 from the peak and meta was down 70 something percent, and everyone said they have nothing left. That no one cares about instagram. Its all going to be tiktok. And many people on the show came on and said forg